Question 1

The time it takes for policy makers to change policy instruments once they have decided on the new policy is called

Accepted Answer

A) the data lag. 
B) the recognition lag. 
C) the legislative lag. 
D) the implementation lag. 
E) the effectiveness lag. 
A) the data lag. 
B) the recognition lag. 
C) the legislative lag. 
D) the implementation lag. 
E) the effectiveness lag.

Question 2

The time it takes for policy makers to be sure of what the data are signaling about the future course of the economy is called

Accepted Answer

A) the data lag. 
B) the recognition lag. 
C) the legislative lag. 
D) the implementation lag. 
E) the effectiveness lag. 
A) the data lag. 
B) the recognition lag. 
C) the legislative lag. 
D) the implementation lag. 
E) the effectiveness lag.

Question 3

Liquidity provision and asset purchase may not be enough to stimulate the economy unless the these policy actions are able to

Accepted Answer

A) lower the real interest rate for investments. 
B) lower the short-term real interest rate. 
C) raise the policy rate above zero. 
D) lower the policy rate. 
A) lower the real interest rate for investments. 
B) lower the short-term real interest rate. 
C) raise the policy rate above zero. 
D) lower the policy rate.

Question 4

The legislative lag represents

Accepted Answer

A) the time it takes for policy makers to obtain data indicating what is happening in the economy. 
B) the time it takes for policy makers to be sure of what the data are signaling about the future course of the economy. 
C) the time it takes to pass legislation to implement a particular policy. 
D) the time it takes for policy makers to change policy instruments once they have decided on the new policy. 
E) the time it takes for the policy actually to have an impact on the economy. 
A) the time it takes for policy makers to obtain data indicating what is happening in the economy. 
B) the time it takes for policy makers to be sure of what the data are signaling about the future course of the economy. 
C) the time it takes to pass legislation to implement a particular policy. 
D) the time it takes for policy makers to change policy instruments once they have decided on the new policy. 
E) the time it takes for the policy actually to have an impact on the economy.

Question 5

When the economy is hit by a temporary negative supply shock and the central bank does not respond by changing the autonomous component of monetary policy,then in the long run

Accepted Answer

A) inflation will be lower. 
B) output will be at its potential. 
C) output will be lower. 
D) inflation will be unchanged. 
E) both B and D. 
A) inflation will be lower. 
B) output will be at its potential. 
C) output will be lower. 
D) inflation will be unchanged. 
E) both B and D.

Question 6

Theoretically,one can distinguish a demand-pull inflation from a cost-push inflation by comparing

Accepted Answer

A) how fast prices rise relative to wages. 
B) the unemployment rate with its natural rate level. 
C) when prices rise relative to wages. 
D) government debt to real GDP. 
A) how fast prices rise relative to wages. 
B) the unemployment rate with its natural rate level. 
C) when prices rise relative to wages. 
D) government debt to real GDP.

Question 7

Policy makers cannot achieve both price stability and economic activity stability when facing

Accepted Answer

A) temporary supply shocks. 
B) permanent supply shocks. 
C) demand shocks. 
D) all of the above. 
A) temporary supply shocks. 
B) permanent supply shocks. 
C) demand shocks. 
D) all of the above.

Question 8

To promote an economic expansion and an exit from the deflationary environment that the Japanese had been experiencing for the past fifteen years,the "Abenomics" aims at

Accepted Answer

A) increasing inflation target. 
B) increasing inflation expectations. 
C) purchasing long-term bonds. 
D) all of the above. 
E) none of the above. 
A) increasing inflation target. 
B) increasing inflation expectations. 
C) purchasing long-term bonds. 
D) all of the above. 
E) none of the above.

Question 9

Which of the following is most likely to lead to inflationary monetary policy?

Accepted Answer

A) declining oil prices 
B) resolution of conflict in the Middle East 
C) the enactment of a free-trade agreement with Mexico 
D) rising unemployment 
A) declining oil prices 
B) resolution of conflict in the Middle East 
C) the enactment of a free-trade agreement with Mexico 
D) rising unemployment

Question 10

When the economy suffers a permanent negative supply shock and the central bank does not respond by changing the autonomous component of monetary policy,then

Accepted Answer

A) inflation will be lower. 
B) output will be at its potential. 
C) output will be lower. 
D) inflation will not change. 
E) both A and B. 
A) inflation will be lower. 
B) output will be at its potential. 
C) output will be lower. 
D) inflation will not change. 
E) both A and B.

Question 11

When the economy suffers a permanent negative supply shock and the central bank does not respond by changing the autonomous component of monetary policy,then

Accepted Answer

A) inflation will be lower. 
B) output will be at its potential. 
C) output will be unchanged. 
D) inflation will be unchanged. 
A) inflation will be lower. 
B) output will be at its potential. 
C) output will be unchanged. 
D) inflation will be unchanged.

Question 12

When the economy is hit by a negative demand shock and the central bank pursues policies to increase aggregate demand to its initial level,then

Accepted Answer

A) inflation will be lower. 
B) output will be at its potential. 
C) output will be lower. 
D) inflation will be unchanged. 
E) both B and D. 
A) inflation will be lower. 
B) output will be at its potential. 
C) output will be lower. 
D) inflation will be unchanged. 
E) both B and D.

Question 13

The Fed's quantitative easing is to purchase ________ to affect credit spreads.

Accepted Answer

A) long-term securities 
B) short-term securities 
C) both long-term and short-term securities 
D) private assets 
A) long-term securities 
B) short-term securities 
C) both long-term and short-term securities 
D) private assets

Question 14

Which of the following statements is CORRECT?

Accepted Answer

A) If most shocks to the economy are aggregate demand shocks or permanent aggregate supply shocks,then policy that stabilizes inflation will also stabilize economic activity,even in the short run. 
B) If temporary supply shocks are more common,then a central bank must choose between stabilizing inflation and stabilizing output in the short run. 
C) Stabilizing economic activity in response to a temporary supply shock results in a larger deviation of inflation from the inflation target rather than a stabilization of inflation. 
D) all of the above. 
A) If most shocks to the economy are aggregate demand shocks or permanent aggregate supply shocks,then policy that stabilizes inflation will also stabilize economic activity,even in the short run. 
B) If temporary supply shocks are more common,then a central bank must choose between stabilizing inflation and stabilizing output in the short run. 
C) Stabilizing economic activity in response to a temporary supply shock results in a larger deviation of inflation from the inflation target rather than a stabilization of inflation. 
D) all of the above.

Question 15

When the economy suffers a permanent negative supply shock and the central bank does not respond by changing the autonomous component of monetary policy,then

Accepted Answer

A) inflation will be lower. 
B) output will be at its potential. 
C) output will be lower. 
D) inflation will not change. 
E) both B and C. 
A) inflation will be lower. 
B) output will be at its potential. 
C) output will be lower. 
D) inflation will not change. 
E) both B and C.

Question 16

The real interest rate for investments reflects not only the short-term real interest rate set by the central bank,but also the financial frictions.When the policy rate has hit the floor of zero,to stimulate the economy at given inflation rates,policymakers can

Accepted Answer

A) lower the financial frictions. 
B) lower the short-term real interest rate. 
C) lower both the short-term real interest rate and the financial frictions. 
D) lower the policy rate. 
A) lower the financial frictions. 
B) lower the short-term real interest rate. 
C) lower both the short-term real interest rate and the financial frictions. 
D) lower the policy rate.

Question 17

The existence of lags prevents the instantaneous adjustment of the economy to policies changing aggregate demand,thereby strengthening the case for

Accepted Answer

A) supply-side policy. 
B) nonactivists. 
C) activists. 
D) demand-management policy. 
A) supply-side policy. 
B) nonactivists. 
C) activists. 
D) demand-management policy.

Question 18

When the economy suffers a permanent negative supply shock and the central bank responds by changing the autonomous component of monetary policy to keep inflation at the target inflation rate,then

Accepted Answer

A) aggregate demand curve shifts leftward. 
B) output will be unchanged. 
C) output will be at its potential. 
D) all of the above. 
E) both A and C. 
A) aggregate demand curve shifts leftward. 
B) output will be unchanged. 
C) output will be at its potential. 
D) all of the above. 
E) both A and C.

Question 19

If aggregate output is below the natural rate level,activists of policies would recommend that the government

Accepted Answer

A) do nothing. 
B) try to eliminate the high unemployment by attempting to shift the aggregate supply curve to the right. 
C) try to eliminate the high unemployment by attempting to shift the aggregate demand curve to the right. 
D) try to eliminate the high unemployment by attempting to shift the aggregate demand curve to the left. 
A) do nothing. 
B) try to eliminate the high unemployment by attempting to shift the aggregate supply curve to the right. 
C) try to eliminate the high unemployment by attempting to shift the aggregate demand curve to the right. 
D) try to eliminate the high unemployment by attempting to shift the aggregate demand curve to the left.

Question 20

The time it takes for policy makers to obtain data indicating what is happening in the economy is called

Accepted Answer

A) the data lag. 
B) the recognition lag. 
C) the legislative lag. 
D) the implementation lag. 
E) the effectiveness lag. 
A) the data lag. 
B) the recognition lag. 
C) the legislative lag. 
D) the implementation lag. 
E) the effectiveness lag.

Exam 23: Monetary Policy Theory

The time it takes for policy makers to change policy instruments once they have decided on the new policy is called

The time it takes for policy makers to be sure of what the data are signaling about the future course of the economy is called

Liquidity provision and asset purchase may not be enough to stimulate the economy unless the these policy actions are able to

The legislative lag represents

When the economy is hit by a temporary negative supply shock and the central bank does not respond by changing the autonomous component of monetary policy,then in the long run

Theoretically,one can distinguish a demand-pull inflation from a cost-push inflation by comparing

Policy makers cannot achieve both price stability and economic activity stability when facing

To promote an economic expansion and an exit from the deflationary environment that the Japanese had been experiencing for the past fifteen years,the "Abenomics" aims at

Which of the following is most likely to lead to inflationary monetary policy?

When the economy suffers a permanent negative supply shock and the central bank does not respond by changing the autonomous component of monetary policy,then

When the economy suffers a permanent negative supply shock and the central bank does not respond by changing the autonomous component of monetary policy,then

When the economy is hit by a negative demand shock and the central bank pursues policies to increase aggregate demand to its initial level,then

The Fed's quantitative easing is to purchase ________ to affect credit spreads.

Which of the following statements is CORRECT?

When the economy suffers a permanent negative supply shock and the central bank does not respond by changing the autonomous component of monetary policy,then

The real interest rate for investments reflects not only the short-term real interest rate set by the central bank,but also the financial frictions.When the policy rate has hit the floor of zero,to stimulate the economy at given inflation rates,policymakers can

The existence of lags prevents the instantaneous adjustment of the economy to policies changing aggregate demand,thereby strengthening the case for

When the economy suffers a permanent negative supply shock and the central bank responds by changing the autonomous component of monetary policy to keep inflation at the target inflation rate,then

If aggregate output is below the natural rate level,activists of policies would recommend that the government

The time it takes for policy makers to obtain data indicating what is happening in the economy is called

Why Study Money, banking, and Financial Markets

An Overview of the Financial System

What Is Money

The Meaning of Interest Rates

The Behavior of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

An Economic Analysis of Financial Structure

Banking and the Management of Financial Institutions

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Financial Crises

Central Banks and the Federal Reserve System

The Money Supply Process

Tools of Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

Quantity Theory, inflation, and the Demand for Money

The Is Curve

The Monetary Policy and Aggregate Demand Curves

Aggregate Demand and Supply Analysis

The Role of Expectations in Monetary Policy

Transmission Mechanisms of Monetary Policy

Web 1:financial Crises in Emerging Market Economies

Web 2:the Islm Model

Web 3:nonbank Finance

Web 4:financial Derivatives

Web 5:conflicts of Interest in the Financial Services Industry

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